Milennial - first home not permanent home

Milennial_Money

Seeking advice on whether to channel majority of my savings on overpaying my mortgage.

I bought my first house last year at 27. Mortgaged at 2.21% interest on £80,000. I have saved an emergency fund (1.40% interest) and currently overpay a small amount of £50 to the mortgage which shortens the term by about 2 years. I save 20-30% of my income which goes towards a small holiday fund and the rest in the emergency fund. In the next few years my salary will increase so I will look more into stocks & shares ISA at that point, I don’t think it’s the right time to get to grips with investing yet. In terms of future plans, I am single and do not want children so no savings needed there but I am open to renovation work or other ways of spending to enjoy the fruits of ones labour.

In terms of interest rates it makes sense to overpay MORE on the mortgage but my concerns are:
- This is not my ‘forever home’ so I am vaguely saving for a second property to purchase in my 30s. Is it better to keep the 2nd deposit for the 2nd property in a savings account? Does anyone have any advice on this?
- I would like to leave the option open to buy a second property and keep the first as it is so cheap for the city I live in and is an area popular for renting (students/young professionals). Would withdrawing the money if paid onto the mortgage to purchase a second home be costly?

Very grateful for anyone’s input on this. and Happy New Year ! I have been a long-time admirer of MSE and this is my first time posting 

Zero_Sum

Its always best to have a decent amount in savings in case of emergencies.
Then once youve got your savings pot, then look to overpay. Whats the LTV & term?
As if over pay then when you remortgage you could get a better rate as your LTV reduces.

p00hsticks

You don't mention a pension at all ?

It may seem a long way off, but the more you put in now the more chance it has to compound. And there are tax incentives that make it worthwhile.

eastantrim4

I'd agree with having your emergency fund to a decent level. Ideally it should be somewhere between 3-6 months of expenses in case anything happens re work etc. Once you have that in place then start overpaying the mortgage, provided there are no other debts.


Hope that helps.

Milennial_Money

Thanks for your responses.

The LTV is 75%. I have 6 months emergency fund saved. I have a workplace pension I contribute a high % to.

My concerns are around using surplus cash to overpay on mortgage vs put in a savings account for my 2nd and probably permanent home.

[Deleted User]

Which is greater, the interest on your mortgage or the interest you'd earn on savings? How far I the future are you planning to buy your next place? If more then 5 years start looking at S&S ISA now.